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Laura Rowley Money & Happiness

Laura Rowley, Money & Happiness

Use Your Horsepower Sense, Buy Used

by Laura Rowley

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Posted on Wednesday, January 16, 2008, 12:00AM

The North American International Auto Show opens to the public on Jan. 19 in Detroit, showcasing luxury sedans, shiny sports cars, and roomy SUVs that rival some of the city's single-family homes in price.

But while there's nothing like being the first to nestle in a new car's supple leather seats and inhale that fresh-from-the-assembly-line perfume, it's an expensive romance.

Online Shopping Soars, New-Car Values Drop

If the idea of saving thousands of dollars is more thrilling to you than that new-car smell, you'll find your heart's desire in the used car market. A wider pool of quality used cars, and progress in Internet search functionality, have vastly changed the buying experience.

In 2007, roughly one in four buyers of late-model used vehicles relied on an Internet vehicle locator or online classified ad service to find the auto they purchased. That's a 44 percent jump over the previous year, according to a study by J.D. Power and Associates.

And there's no beating the price. "People don't think of depreciation as an out-of-pocket cost, but it is," says Philip Reed, senior consumer advice editor at Edmunds.com and author of "Strategies for Smart Car Buyers." "There's a steep drop off in [value] in the first year, and 30 percent depreciation by the end of the third year."

For example, Edmunds looked at the Lexus GS 430 and GS 450. "The first-year depreciation on the new car is $14,000; if you bought a two-year-old model, the depreciation is $3,000 in the first year of ownership," says Reed.

Know What You're Looking For

Before you begin your search, get the Kelley Blue Book value on the make, model, and year of the car you're considering. Edmunds offers two appraisal tools: the True Market Value guide and the True Cost to Own calculator, which considers ownership costs like maintenance, repairs, depreciation, and fuel.

If you don't have a specific vehicle in mind, the $10 "Consumer Reports Used Car Buying Guide 2008," which comes out on Jan. 22, is a good place to start. Quality is widespread, experts say, so look beyond the popular brand names. "I worked as a mechanic 30 years ago, and it wasn't unusual to overhaul the engine at 75,000 to 80,000 miles," says John Paul, AAA's southern New England "car doctor." "They don't make them like they used to -- and that's a good thing. The line between best and worst is pretty thin these days." (See my blog for specific model recommendations.)

Also get a one-month subscription to CARFAX, the oldest of several services that offer reports on a vehicle's history through its vehicle identification number (VIN). The report tells you how many owners the vehicle has had, when it was serviced, and whether there was an odometer rollback or a salvage report -- indicating that the car was stolen, in a serious accident, or flooded.

"The VIN can also let you know any outstanding recalls that need to be taken care of," says Paul, "Thirty to forty percent of recalls announced never actually get fulfilled."

Do Your Research

Next, head to the Internet. The sheer volume of listings, ease of use, ability to refine a search, and forums with advice from other buyers has mushroomed in recent years. Some 72 percent of Internet shoppers in 2007 visited consumer forums to get opinions from real car buyers, and 94 percent found it helpful, according to the J.D. Power and Associates study.

If you're someone who worries about buying a lemon, go to the individual automaker's home page and click on "certified pre-owned vehicles." These models are usually no more than five years old, and undergo an inspection based on the manufacturer's certification standards. Most important, you get a warranty. (Be sure to get the real deal from the manufacturer, rather than an extended service contract issued by a third party.)

All that reassurance can be costly, though. "You don't get the bargains in certified shopping, because they try to turn used-car buying into a new-car experience," says Reed. "You don't need a mechanical inspection of a vehicle, and they give you a guarantee. That makes it simple, but you will pay extra."

Online Bargains Abound

CarMax.com is another fast-growing seller that offers warranty protection. (Warren Buffett's Berkshire Hathaway bought a 6 percent stake in the company last November.) CarMax operates 86 used car stores in 39 U.S. markets, where it buys, reconditions, and resells vehicles. You can search its entire network through the web site and have the car shipped to you for a fee. The company touts its no-haggle pricing and five-day money-back guarantee. (Even with a warranty, it may be worthwhile to pay an extra $100 or so to have a vehicle inspected by an independent mechanic.)

Then there are the online auto classified ad sites, offering vehicles from both dealers and private sellers. You can search by make, model, year, price, mileage, location, and more than a dozen specific features, from engine to upholstery. The biggest players include AutoTrader.com, with 3 million cars for sale; Cars.com; and eBay Motors, which had $18 billion in sales last year.

According to Reed, "eBay is a very active source, and it's my estimation that [non-specialty] cars sell at wholesale prices on eBay" He adds, "There's quite a bit of flexibility to search for local cars, and work with a seller in terms of inspecting it beforehand. People are also buying cars and having them shipped without a whole lot of fuss. There are usually provisions if [the vehicle] doesn't live up to the description." (See my blog for buying tips.)

Better Safe Than Sorry

As for safety, experts say most late-model used cars offer the critical features. First, examine the crash test data from both the government and the Insurance Institute for Highway Safety. Then put these top safety features on your shopping list:

• Airbags: Frontal airbags have been required since 1998 in passenger cars and 1999 in SUVs and trucks, but side- and rear-impact air bags are still optional, and may be difficult to find in used cars, says Reed.

• Antilock brake systems (ABS): When you slam on your brakes in a panic, you often lose steering ability. "If the wheels aren't turning, you're on a platform skidding forward," says Reed. "With ABS, you can continue to steer -- it's a huge development in safety." ABS can be found on two-thirds of new cars.

• Electronic Stability Control (ESC): This feature allows the car to sense when the wheels are losing traction on a turn, and independently brakes the wheels to keep you in the direction you need to go without rolling over. It's estimated to save between 5,000 and 10,000 lives a year. ESC was standard in half of new cars last year, and the government is requiring it in almost all vehicles by 2012.

•Tire pressure systems: "It's appalling how little attention people pay to the pressure in tires," says Reed, adding that these systems will become mandatory in new vehicles in 2008. "You begin to compromise safety at 5 percent below recommended pressure, fuel economy is compromised immediately, and the tire wear is increased."

What you won't find in the used market are the features like airbags for the legs and knees, lane departure warning systems, and rear back-up cameras, with a screen to show what's behind the vehicle when you put it in reverse. "There are going to be tradeoffs when you buy used," says Reed, "but you can find everything you need. And far and away the most important safety factor is the driver."

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  • Anthony - Monday, January 21, 2008, 9:37PM ET  Report Abuse

    • Overall: 5/5

    The article is so right on! Check out tapsus.com, I bought two cars for me and my wife. They did the financing and had the cars shipped to my door in mint condition. You have to try them at least once.

  • BRAD - Monday, January 21, 2008, 7:00PM ET  Report Abuse

    • Overall: 4/5

    Buying used, when done right, can save a lot of money. Here's one other thought when it comes to saving money: If you take care of your car, sell it yourself. One may say, "I don't want to be bothered." Because I kept service records and kept my cars in top shape, I sold my last two cars (one every ten-years) to the first person who looked at them. I didn't have any haggling on the price because I priced them at $200 under book-value for their excellent condition, and then stated the price as firm. What was my cost for the two-decades of car ownership on the above mentioned cars, excluding gas and insurance? $21,756 (minus the $1200 and $3300 I received in re-sale on the two-cars). Sound like a lot? It's $90 per month on average. Sound hard to believe? First car was a Camry I paid $5,800 cash for, and the second car was another Camry, and at that time I paid $8,400 cash for it. I was fortunate to have but one major repair on each car, but then again I bought quality, or what I thought was the biggest bang for the buck at that time. It proved true. Needless to say I am shocked when I read of people paying $500 a month on a 48-month car lease. I can own a car(s), and that's all it is, for twenty-years and put out less money than a person will in four-years of leasing. One could argue the $500 is at todays prices and they would have a point, yet I paid $13,500 cash for my current Camry and will have it for at least eight more years. With scheduled service and with a few unexpected service bills, will it cost me more than $60,000 (120 months times $500 per month) over the remaining eight-years that I plan on owning it? What does this all add up to? Financial freedom, which is the ability to control one's life as opposed to having it controled by debt. The money I saved has created, in twenty-years, more than $65,000 when compounding is considered. Not very exciting you say? Consider if you will, approximately an additional $500,000 to my wealth by the time I retire in twenty-one-years. Simply double $65K every seven-years for the next twenty-one years. Becoming wealthy in America is easy, you just need to plan for it. I read "Your Money or Your life," at a very early age and it was in harmony with what my grandfather taught me. I still follow the paradigm, sans the advice on bonds at the present time. I will do the tax-free muni's when I'm at the 5-10 million mark. In the interim, I'm enjoying working only thirty-two hours a week. This is not rocket science or impossible my friends, just stop trying to act rich and start living a rich life. I am in no way hurting and I wish this for anyone who will listen and think about their own life. We have the choice to follow the other cattle or to be diiferent from the herd. Let people think you are poor! Money is like sex, those who have it don't talk about it.

  • anthony - Monday, January 21, 2008, 5:51PM ET  Report Abuse

    • Overall: 3/5

    Nice cursory article. I lease and I'll tell you why. I am financially sophisticated and need am image car for work (I'm a business consultant). Leases work if you do your homework and work it hard. In leasing, you are basically paying for the value of the car you use (depreciation) and the cost of the money for the purchase of the car. If done right, you buy the car at the absolute lowest price (search regionally, use a broker, etc.) and then combine that with a lease at the highest residual value (don't just take the dealer's lease or the manufacturer lease). These combined will create a great deal. Additionally, with a purchased car, you pay sales tax on the entire amount, with a leased car you only pay for tax on the value you use. Case study- I leased a '05 Mercedes-Benz E320 (in 2005) for $520/month (the best the local dealer would offer was $679/month) for 36 months ($0 down)- $556 after tax. How- I negotiated a $45K purchase price on the $51K car and found a lessor (US Bank) that had a residual of $33K vs. the mid-$20's most of the others used. Essentially, my total cost is about $22K (incl. maint. and tires). Granted, this is more than a Camry, but a Camry wouldn't work for me. However, lets compare this to buying a 2 year old version of the same car. I could have purchased a two year old MB for about $36K (more than $38K after tax) and sold it in three years for about $20K (remember, it is not easy to get top dollar selling a car, not to mention the hassle of selling a big money car in the used car market). Your costs would be about $28K ($18 for depreciation $7K for interest at a modelst 6% $3K for repairs and maintenance- about 50% more than what I paid- and could be much higher). So, you could pay, in this example, $8K MORE to drive a used, out of warranty car. If you are planning on keeping a car for 10 years- by all means, buy used. If you are going to keep it for a few years, find a car with low depreciation (high residual), negotiate the hell out of both ends of the deal and enjoy! By the way, as my lease is expring shortly. I am considering another MB, or more likely an Acura RL or TL (as they combine lower cost, ability to negotiate a great deal with high residual values). For those looking for a lower cost strategy, the Camry is prime (as a new Accord just came out) for a great lease. TR

  • Yahoo! Finance User - Monday, January 21, 2008, 5:27PM ET  Report Abuse

    • Overall: 5/5

    I still want that new lamborghini though :)

  • munkstump - Monday, January 21, 2008, 5:23PM ET  Report Abuse

    • Overall: 4/5

    Regardless of it's content, this article is good simply for bringing awareness to the used-car market. It is not what it once had been. Up until the mid-eighties, 70k miles was considered very high mileage, especially for a domestic vehicle. But now it is a break-in period. I've purchased many of my cars over 120k, and I've had considerable luck. Cars are built much differently than they once were. I hesitate to say they are better, but there is considerably less owner-mantenance involved. A good thing, since most people today regardless of gender are very mechanically retarded, when compared to the average joe of even the 1980's. Men have been trained to work in cubicles for the last few decades, so their sons have nowhere to pick it up at a young age. It won't be long until there are only a very few, very expensive mechanics around. Some people say if buying used, you are buying someone else's problems. But more often than not, the higher mileage vehicles have had all of their problems addressed by the previous owner. Belts, brakes, hoses, plugs, alternator, water pump, wheel bearings, sway bar bushings...I've replaced all of those things, as a first owner, at 60,000 miles. It was the last new car I ever owned! Those items are not covered under warranty,cuz they are not "part" of the drivetrain, even tho u can't drive w/out most of them. U r going to replace parts on any vehicle you own, if u drive it long enough. So why not buy one for 1/2 the price? I've bought stellar vehicles for under $4k in very nice condition. I used them for business even. When I painted professionally, I bought a cargo van with a rust/dent free body for $3200. I drove it for five years, replaced nothing, and sold it for $2K! The amount you save on car payments and high insurance is amazing (NY is very high). I think if someone gave me a new car, I would trade it for a used one just for the insurance break! Plus the feeling of not worrying if you get rear-ended or something. You can set you mind at ease while city driving or smashing shopping carts, and not get distracted by that nasty lease contract. Cars are a perfect example of people buying things they can't afford, and then complaining about their finances. Don't drive anything if you can't afford to crash it, I always say.

  • Yahoo! Finance User - Monday, January 21, 2008, 5:20PM ET  Report Abuse

    • Overall: 4/5

    This article is good. There is a lot of people whining stuff like "Uh, this article sucks, It didn't tell me anything I didn't know already"... guess what, this article wasn't addressed to you!. This is a good article for a guy that doesn't know much about cars and I think it gives a VERY good advice: Buy used!. By reading a few of the other comments I realized again that the world is full of dumb people. You can't argue with a fool they say... and they are right!. This article is all about ECONOMICS, it is targeted for people that really care about saving a buck here and there; it's not for a retard that thinks that he will be hit by a drunk driver tomorrow ergo he should spend all his money leasing a new Porche and spending every single dime enjoying his life day to day. I'd rather be optimistic and think that I will live long enough to see the Olsen twins die of old age. If you think that the car you drive is some sort of "trophy" and a reason to be proud of, then this article is not for you. I also read a comment from somebody that said "I would never buy a used car because it should have problems, why else the owner decided to sell it?"... DUH!, there are many many people that love to buy a new car every year or two, it doesn't matter if they did like the car or not, it's just the way they are. Buy used doesn't mean buy the first pile of junk that happens to cross your way, it means be smart and make an educated purchase, you will save a lot. BUT, if you are like the rest of us and think that cars are just the means we use to move from a place to another in a reliable, safe and comfortable way, then you should be able to understand what all this is about. In the end, I thank God for dumb people, for they allow me to buy a nice used car with low mileage at an awesome price.

  • Yahoo! Finance User - Monday, January 21, 2008, 4:55PM ET  Report Abuse

    • Overall: 2/5

    The article did have some truth to it, however, there were a few misleading statements. First of all, a Certified Preowned vehicle does not cost more, in most cases. In fact, you can save money in a couple of ways by buying it certified. It already has an extended warranty, and has gone through an extensive inspection before the certification, so the chances of mechanical problems are less, and are often covered by the extended warranty. Also, most certified vehicles come with a lower interest rate, offered by the manufacturer, which is usually two or three points less than standard financing rates for a used vehicle, saving you hundreds or even thousands over a sixty month note. The second incorrect statement is the one about NADA and Kelley Blue Book trade-in values. The numbers these websites will give you ARE NOT ACCURATE! You can expect about one to three thousand less for your trade, depending on LOCAL market value. No dealership is going to give you more for your trade, than what they can buy the same vehicle for at auction. DUH! And, yes, I am a car salesman.

  • JeffreyN - Monday, January 21, 2008, 4:23PM ET  Report Abuse

    • Overall: 5/5

    Good Article/Interesting Responses: I am intrigued by some of the different opinions seen here. I think the article is a very basic and accurate approach to used car research and shopping. I myself am a location manager for our store who mainly deals in late model,low mileage pre-owned autos. I am not here to talk about my store, but my opinions on purchasing that "used car". When initially starting your hunt, most consumers will have a list of needs that they need filled. I.E. how much time do they spend in the car, how far do they drive to and from each day(fuel mileage). How many people are usually riding with me, etc. These are questions that are usually important when considering what to pick. Everyone has a need and a want. So I would highly suggest to start off by doing some homework. Things to Do: Read Consumer Reports Read User Opinions ONLINE(forums) Do what this article says... Understand the Dealers are going to make a profit as well(just not all of it on you) Things to Consider: * Does the dealer offer a place for me to service my purchase? * Does the dealer offer Financing? * Does the dealer offer a Warranty? * Is the dealer reputable?(you can check the Better Business Bureau, amongst other sites for info regarding this? * Does the dealer have a high amount of overhead?( We will get to this in a minute). Simply by asking yourselves good questions, you can make the car shopping experience much smoother. Just do a little research, so you do not make a bad decision or "impulsive" decision in the market. There are some very good salespeople out there.....I am one of them. I find that a majority of my customers come back and buy again, or send me people to assist. I take my job seriously and really want people to know that this article is a good "basic" thing to know when preparing/shopping. To those of you who say they will never buy a "used car", you are OK too. We have to have the "NEW CAR BUYER" in order to do what we do, sell vehicles for thousands of dollars less than MSRP. You see, the reason why New Cars depreciate so fast is the HUGE rebates the manufacturer puts on to help sell them. I.E. a 35000 vehicle that sells for 27500 after rebates,discounts, and incentives. What now happens to the person's vehicle who paid 32000 dollars a year ago for the same veh. w/o the incentives? He gets a lousy trade in of a lot less than 27500. Why? because the dealer now has to bring it in cheap enough to still make a profit and sell it for a considerable amount less than the "NEW" one that has all the incentives from the factory. This is why buying a 1-2 and even up to 5 year old pre owned auto makes so much sense. One final note: Overhead will play a big part of the profit margin a dealer will have to obtain for the company to run it's day to day operation. Sometimes you can find your best bargains from the little guys who have a reputable business in town. This is definitely worth looking into. The guys who have the least amount of overhead can afford to pass better deals along a lot of the times when selling you a car and also buying your trade in from you. Remember, they have to stock their lots full of cars, so they are much more willing to be fair on a trade if they can see, touch, feel, and drive it. To conclude, buying a used car can be a very smart decision if you do your homework, get a reputable dealer, have a good mechanic give it a thumbs up, and get a good warranty with it. Remember all cars depreciate over time, so you might as well take advantage of those out there who absorb that 1st year of depreciation. Hope this helps, it was random and off the top of my head between my day to day operations.

  • lee p - Monday, January 21, 2008, 4:23PM ET  Report Abuse

    • Overall: 2/5

    carfax depends solely on the accident being reported. I am a car salesperson and have hadcars for sale that are "carfax clean" and I can tell by quality of repairs that it was hit, sometimes on every body panel. As for a Used car? SOme folks want "new" so they can impress people. some because they lease their cars. If you are buying a car to keep awhile thye BEST way is one that is current model year or one year old. It will save thousands. Unless it was an overpriced car to begin with or a statis syble type car.

  • luisa - Monday, January 21, 2008, 4:18PM ET  Report Abuse

    • Overall: 4/5

    I spent months researching new Mazdas, only to become exhausted by the process. I finally went out one day and bought a pre-owned VW Jetta, and I couldn't be happier! Buying new just doesn't make sense anymore.

  • boB - Monday, January 21, 2008, 4:17PM ET  Report Abuse

    • Overall: 2/5

    Why do people get rid of vehicles? Tired of it? OK! A lease vehicle who's time is up? OK! Because there's a PROBLEM with it? Dang straight, skippy!!!! So why buy other people's problems? All the paperwork in the world isn't gonna save your bacon when buying a used vehicle. A mechanic doing an extremely thorough inspection from head to toe, top to bottom, front to back and inside out, isn't gonna find EVERYTHING wrong with a vehicle. At least if you buy new, you have a warranty. Most states have lemon laws but some only protect newly purchased vehicles. And, without hands on inspection by your own self or, a your reputable mechanic, your gonna buy sight unseen off the internet? Better buy that Brooklyn Bridge right now, Goob!

  • Yahoo! Finance User - Monday, January 21, 2008, 4:11PM ET  Report Abuse

    • Overall: 4/5

    if you want to know a really great program or website to purchase a vehicle try www.samsclubauto.com. I purchased a vehicle and got a great deal.

  • Tia - Monday, January 21, 2008, 4:04PM ET  Report Abuse

    • Overall: 3/5

    I have always bought a used car and feel that buying a new car is for show and a waste of money. Do your homework before making any major purchase!

  • Yahoo! Finance User - Monday, January 21, 2008, 3:29PM ET  Report Abuse

    • Overall: 2/5

    Be careful when using Carfax reports. My used car had a clean report when I bought it, and I had the car inspected by a trusted mechanic who said the car was in good shape. When I started trying to sell the car about two years later, an accident showed up on the report that a prospective buyer purchased. According to Carfax, it can take up to a year for repairs and accidents to show up. Who knows if the car really was in an accident or if it was a mistake on the report. Carfax was completely unhelpful at trying to determine if the report was correct. Carfax reports are not infallible, although many people seem to think they are!

  • Jon - Monday, January 21, 2008, 3:16PM ET  Report Abuse

    • Overall: 4/5

    Here is some real world advise...LEASE...If possible, lease to avoid new car depreciation and used car service issues...Some friendly advise from an "honest" car guy!!! Jon Dzydzora, Finance Manager, Hackettstown Ford, Hackettstown New Jersey www.nj-ford.com

  • Yahoo! Finance User - Monday, January 21, 2008, 2:51PM ET  Report Abuse

    • Overall: 1/5

    The story would have been OK if she didn't use a Lexus as the example. I bought a new RX330 in 2004 (2005 model yr) for $35k. A used one (1-2yrs old) was going for $32k. I was/am happy to pay $3k extra for a totally new car. Now back to her example. Go to www.magnussenlexus.com and compare a 2006 GS430 with the list price of a 2008 GS460. The difference is about $10k. That's a 2yr old car with a model change in between. The used car price typically doesn't move much at the dealership (I tried) but the new price can be negotiated quite well. Maybe her argument works well with other brands. (Detroit?)

  • IanW - Monday, January 21, 2008, 2:50PM ET  Report Abuse

    • Overall: 3/5

    As a former used car sales man I can tell you that used cars CAN be a great deal. Look for 3 or more similar cars on a lot, they were probably bought at auction and came from a rental car company. These cars are usually about 6 months old - that's when rental car companies often trade them in - and the depreciation hit has been taken by the rental company. Also, the price on the windshield is usually about 3K or more above the dealers cost. Used cars is where a dealer makes their real profit, that and on your trade.

  • Yahoo! Finance User - Monday, January 21, 2008, 2:37PM ET  Report Abuse

    • Overall: 1/5

    Did carmax pay for her vacation or something?? After researching carmax I can get a much better deal using cars.com to find the vehicle that I want, then haggle with the dealership about the price and my trade. I have bought lots of used cars and have always gotten a great deal in my eyes. KBB.com for values lol, try to get a dealer to give you KBB price on any car for a trade in. You hear the same thing, "Click on the button for KBB to cut you a check". The best way I have found is to just be upfront with whomever I am dealing with. People are the same everywhere and appreicate that. My advice to the writer: Spend more time outside your office doing actual research, go to a dealer, sell a used car yourself, buy a used car, and don't let companies buy your opinion.

  • Salim - Monday, January 21, 2008, 2:26PM ET  Report Abuse

    • Overall: 1/5

    It's always the same story repeating every week. She should take into consideration that the same subject has already been discussed several times on Yahoo Finance, this matter is being discussed over and over weekly. We know the old adage, let other do the mistake of buying new, buy the car 2-3 yrs old, while it's been highly depreciated and still on manufacturer's warranty... These columnist are getting paid $xxx to write an article that's deja vu (ie. plagiarism).

  • Cat ^..^ - Monday, January 21, 2008, 2:24PM ET  Report Abuse

    • Overall: 2/5

    More often than not, there's a reason someone dumped the car after a year or two of use that won't show up on CarFax. In my experience, the money you save from buying a used vehicle is more than offset by expensive repairs, inconvenience of having it in the shop, wishing you had different features, and general dissatisfaction over how the previous owner treated the car. Unless you're one of those people that has to have a different car every year, you're better off buying a quality new car you really like and taking proper car of it for 7 years. Do your research to find what models have a better track record and lower insurance premiums.

  • Yahoo! Finance User - Monday, January 21, 2008, 2:15PM ET  Report Abuse

    • Overall: 2/5

    What about things like, don't tell about the trade until you get the lowest price? I didn't see it in the article. I'd know what I wanted, have the cash/check in hand, search for weeks or as long as it took, compare it with the private market, and then buy. Many of the article ideas were common sense, no "secrets."

  • Felicia - Monday, January 21, 2008, 2:08PM ET  Report Abuse

    • Overall: 5/5

    This was a extremely helpful article. My husband and I purchased and Infiniti QX56, 2007 used due to the previous owner thought it was too much truck for him. I am happy to say we had researched large suvs based on our need for over a year. Now, when I go to the dealeship for an oil change, I see the 2008 which looks exactly like mine and the truck I have has more in it and on it compared to the fully loaded 2007 and 8 and my truck cost $20,000 less go figure, buying used is way better and it was certified by the dealership with a 100 th mile warranty at no additional cost. This article is way on point for the consumer who is money conscious, and who shouldn't be in this economy.

  • ScottF - Monday, January 21, 2008, 2:03PM ET  Report Abuse

    • Overall: 5/5

    Great advice. Your first 2 years of payments minus your 20% down go towards the depreciation, taxes, processing fee and of course profit. I"ve been a financial counselor for a few years and I don't understand how many of the people I counsel get into these new vehicles that they often must strech their budgets for and find out there after that the vehicle is not worth near what they; paid. To compound the problem they don't put enough down on the loan so they are required to take out gap insurance to insure the bank will get their money in the case of a complete loss. Thus costing additional monthly fee's.There is currently a glut of new vehicles on the market and as the gentleman posted earlier even if you make a bad decision you'll be much better off paying $1500. for a repair than to purchase new.

  • CB8Z - Monday, January 21, 2008, 2:03PM ET  Report Abuse

    • Overall: 2/5

    CarMax? Give me a break... look @ Cars.com and you will find that CarMax is consistently higher priced than other dealers! You want a CarFax, any reputable Dealer should provide one to you, in many cases you can view one on a specific car at a Dealers website. I bet Mr Reed has never sold a car in his life yet is as arrogant as the writer in that they, completely inexperienced in the Automobile sales, offer you the consumer, advice. I have been in Auto Sales for years, we are not all bad people but like any industry we have some bad people in it. I manage a small rural Chevrolet store in Lemoore, Calif. and we are about as easy going as anyone could find. We track Internet pricing and insure our cars are among the lowest priced in our area and almost always priced lowered than Car Max (why should you care in Warren Buffet invested in CarMax, what does that have to do with car buying advise?). It is all marketing folks at CarMax and stores like it. As for Edmunds or Kelly Blue Book they like to advise you the consumer but try and get them to buy your trade in, they won't of course because they are not the one who may have it sit on their lot for 200 days before it sells. They are like friggin' Politicians, good at telling everyone else what they should do and completely screwed when it comes to taking action themselves. Kelly and Edmunds are nothing but a guide, they are not in the market of selling cars, flooring inventory or any other thing that has to do with running a successful Dealership. The days of dealers making huge profits per automobile are long gone. In fact the industry as a whole is still living with the reputation that was earned 40 years ago. It really is simple, big city, big time dealers have huge overhead and that cost is passed on to you, the consumer. It can be made up in volume sometimes but not always. We, those of us at small Dealerships work from the stand point of needing return / repeat customers as we do not have the advertising budget "big" dealers have. There is a GM dealer with 5 GM lines (Chev, GMC, Buick, Pontiac, Cadillac) 7 miles east of us, he just spent between 6 - 8 million dollars to open a GM World type store. So, how much do you figure he has to average as profit per car to pay his overhead? How many cars a month must he sell? Well, about 150 cars per month and $3000 average per auto, JUST TO BREAK EVEN! I used to work for a Dealer that had 9 car lines, in one Auto Mall, his overhead? $2.25 million per month, they spend over $250,000 per month on advertising. In contrast at our little dealership, our overhead is $100,000 per month and that includes payroll, Service and Parts Departments as well as Sales Department. We spend very little per month advertising, so at a place like ours we had better treat our customers right or they won't come back and that is where the bulk of our business is, Repeat Customers. So you want a good deal? Stop listening to morons like these, find a small rural Dealership and get treated right, get treated fair and get the support you deserve. I have seen our owner get on the phone and get Chevrolet to replace a blown engine with 45,000 miles and no extened warranty (expired @ 36,000 miles) at no cost to the customer. Why? Because they have bought here for years, have their auto's service here and that is just how a small dealer does business. The best part is people just drop in for coffee and conversation sometimes and we like that too. We go to Church with these people, we see them at Social functions, we see them around town, we are good neighbors, just another local business trying to make a living, enjoy life and family. Car buying does not have to be stressful and you do not have to listen to morons like these. Quit worrying about saving $50 or a $100 on a $20,000 purchase, worry about the service you get. It is like ordering a fine dinner, if the serive sucks, if the waitress or waiter sucks, so will your meal, GUARANTEED!

  • DaleC - Monday, January 21, 2008, 2:01PM ET  Report Abuse

    • Overall: 5/5

    Very well written and communicated article. Thank you very much for the reference information. I have been a long-time purchaser of the used vehicle market, looking for the late model, low mileage beauty that has not on the lot for very long, but long enough to entice the dealer to deal a little to clear it off their lot. So far, so good. The used vehicle market has lots to offer at far below the new car price, with all of the comforts of new. I, like others who have commented before me, would never buy a vehicle of any type from an internet-only dealer, only because I cherish the opportunity to meet and talk to the dealers while standing in the lot. Again, thanks for this important info, and yes, I realize that by having these other outlets, there is something for everyone's comfort level.

  • eddie - Monday, January 21, 2008, 2:01PM ET  Report Abuse

    • Overall: 2/5

    coming from car salesman. this lady probably knows something or two about saving an extra dollar. I know for sure that it's better to buy new. first off new car new owner less problems.80-90% of used vehicles are rental or fleet vehicles. who knows what has happened in the past with those vehicles who dont get reported to car fax after accidents and what not. and far as depreciation on new cars; of course the value will go down in the first year. there is no real market in the used car world to evaluate the value on vehicle. after a year the vehicles value adjusts itself. used vehicles come already depreciated and with the prolems the last owners had. when you buy used you must really do research on the vehicle, make sure that it is not a rental or fleet vehicle, and make sure that it's a repoed vehicle. thank you, ps selling used cars would benifit me more since there is bigger profit margin between used and new vehicles

  • Darlene O - Monday, January 21, 2008, 1:56PM ET  Report Abuse

    • Overall: 1/5

    The article is poorly researched and not very informative. In general, it is easy to get a good deal on a used luxury car like the Lexus the article used as an example. The more expensive the car is new, the better deal you get buying a used one. However, if you are in the market for anything that retails new for under about $25,000, you will always do better buying new. A quick search of the Carmax site found an '07 Chevy Malibu with only 5k miles on it for $18,000. The '08 model has a MSRP of $21,600 for the same model and features. No one pays MSRP. Any dealer will sell that car new for $19,000 or less and give you a much better trade in for your current car. Then, if you are financing the car, expect to pay at least 3% higher interest on the used version. In the end, you will pay MORE for the used Malibu. Still sound like a good deal?

  • Hayley - Monday, January 21, 2008, 1:35PM ET  Report Abuse

    • Overall: 4/5

    You have a typo on the first page introducing this article on Yahoo!

  • Yahoo! Finance User - Monday, January 21, 2008, 1:33PM ET  Report Abuse

    • Overall: 2/5

    This article must have been written by a carmax employee. I did some shopping there and came to the conclusion that they are rip-off artists. They price their cars above kbb and nada average retail, and offered me $5000 less than average trade for mine. If you want tro truly get a good deal, but want to buy from someone that will be accountable and take care of you, I suggest asking around to friends and family and see which smaller independant car lots they have purchased from in the past. Usually if you see a place that has been in business for 10 years and has no complaints on the BBB website then you should be in good shape. I have purchased my last 11 cars from a small dealer in my area, Morris's Auto Sales in belton, MO and i would recommend them to anyone. My last purchase was a 2001 Volkswagen Jetta TDI in 2002, the car had 19k miles on it when I bought it, and now has 148k and no problems yet. I have done all the routine maintenance and am completely satisfied with my experience. I have found that when you buy from a smaller lot, you do get a better deal because their overhead is so much lower than a place like carmax or a ford/chevy/toyota lot, so they are more willing to give you the best deal, and are more likely to have the same staff year after year. Most respectalb eindependent lots also sell aftermarket warranties cheaper than big dealers and they cover just as much if not more things than the extended factory warranties. As for financing, i think that most of you that report paying high interest rates do so because you have bad or weak credit, which is no ones fault but your own.

  • Yahoo! Finance User - Monday, January 21, 2008, 1:32PM ET  Report Abuse

    • Overall: 3/5

    pretty good. i've never thought of buying a used car as a good thing!

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